Wilo USA, LLC v. RST Thermal, Inc.

Filing 24

MEMORANDUM Opinion and Order Signed by the Honorable Arlander Keys on 12/13/2013. Mailed notice(tlp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
WILO USA, LLC, a Delaware
)
limited liability corporation,)
)
Plaintiff,
)
)
vs.
)
)
RST THERMAL, INC., a
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Massachusetts corporation,
)
)
Defendant.
)

No. 13 C 4041
Judge Robert M. Dow. Jr.
Magistrate Judge Arlander Keys

MEMORANDUM OPINION AND ORDER
Plaintiff, Wilo USA, LLC, (“Wilo”), filed suit against
Defendant, RST Thermal, Inc., (“RST”), to collect $61,037.49,
plus servicing charges and attorneys’ fees, for goods accepted
by RST, but for which Wilo alleges RST has not remitted payment.
RST filed a counterclaim pursuant to the Massachusetts unfair
trade practices act, Mass. Gen. Law, ch. 93A, §11 (“Chapter
93A”), and the Delaware Deceptive Trade Practices Act, Delaware
Code §2531,et.seq. (“Delaware Act”), for $90,000 in damages.
Currently pending before the Court is Wilo’s motion to strike
Defendant’s counterclaim.

For the reasons set forth below,

Wilo’s motion to strike is granted.
Background
Wilo, a Delaware corporation with its principal place of
business in Rosemont, Illinois, manufactures and supplies water

pumps and circulators for residential and commercial use.

RST,

a Massachusetts corporation with its principal office located in
Westwood, Massachusetts, is a representative for various
manufacturers of heating and cooling products.
On or about February 1, 2009, Wilo and RST executed the
“Wilo USA LLC HVAC Manufacturer’s Representative Agreement”
(“Agreement”).

(Doc. No. 1-1, Pl.’s Ex. A.)

The Agreement

provided that RST may serve as Wilo’s representative in certain
areas of the U.S., solicit orders from customers, and receive
commissions for its services.

Additionally, the Agreement

provided that it may be terminated by either party without cause
at any time with 30 days written notice.

Pursuant to the

Agreement, RST solicited orders for Wilo products from various
third-party customers.
Several clauses of the Agreement address the terms for
placing orders, making payment for product, and the terms and
conditions of sales, including: Section 5A of the Agreement,
which provides that “[a]ll Product orders solicited or obtained
by [RST] shall be issued by the customer to [Wilo] in [Wilo’s]
name…”; Section 6D provides that “[Wilo]” shall bear all
expenses of invoicing and collection from the customers for
sales made pursuant to orders solicited or obtained by [RST]…and
[Wilo] shall bear all credit risks for such sales…”; and Section
7A provides that “[a]ll payments for [Wilo] products shall be
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paid directly by the purchaser to [Wilo]…” (Doc. No. 1-1, Pl.’s
Ex. A.)

The Agreement outlines that orders came to Wilo

directly from third-party customers.

Additionally, RST entered

into a Credit Application on March 15, 2010, and ordered parts
directly from Wilo to sell themselves to third-parties. Id.
On December 20, 2011, Wilo invoked its right to terminate
the Agreement within 30 days.

As a result, the Agreement was

terminated on January 20, 2012.

RST continued to order goods

from Wilo until approximately March 12, 2012.

Wilo claims that,

to date, RST owes and has failed to pay $61,037.49 for goods
that it directly ordered, received, and accepted from them.
Def.’s Answer p.5, ¶23.
RST contends that the invoices for which Wilo seeks
payments were for Product orders for third-party customers, to
which RST is not obligated to pay, since Wilo agreed to bear the
credit risk for such sales.

Therefore, RST argues, Wilo is

estopped from collecting said payments.
p.8, ¶10.

Def.’s Counterclaim

Additionally, RST argues that Wilo failed to credit

them for payments already made, as well as for products
returned.

Lastly, RST contends that the invoices for which Wilo

seeks payment include non-conforming or otherwise defective
goods.
RST counterclaimed that Wilo's representatives stated that
the company's circulator pumps were technologically competitive,
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“green,” and would be Americanized as necessary, and that
suitable installation components would be available in a timely
fashion.

Def.’s Counterclaim pp.9-10.

Additionally, Defendant

claims that Wilo representatives repeatedly advised Defendant
that the company would do whatever was needed for the American
market.

RST claims that, in reliance on such discussion,

Defendant entered into both the Agreement and the later Credit
Agreement, and performed its obligations under those Agreements,
including the introduction of Wilo's product line to engineers,
wholesalers and contractors, notwithstanding their longstanding
relationships with competitors.

RST claims to have utilized

significant amounts of money and resources to make major efforts
to increase Wilo’s sales in its geographical area, all in
reliance upon Wilo’s representations.
In October 2011, Wilo announced that it would introduce a
pump with an integral check valve, the American industry
standard for manufacture of such an item, but almost
concurrently, purported to terminate the parties’ Agreement
without cause.

Def.’s Counterclaim pp. 12-13.

RST argues that

termination of the Agreement by Wilo on the eve of the
introduction of a circulator pump with an integral check valve
was contrary to the assurances Wilo had made to Defendant, and
deprived Defendant of the ability to recover the approximately
$90,000 it devoted to improving Wilo sales in 2011 alone.
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Defendant argues that Wilo's actions violated its obligations to
act in good faith under the Agreement, constituted an unfair or
deceptive practice in the conduct of its business, and with
knowledge of the substantial efforts Defendant made in reliance
on those representations, Wilo violated Chapter 93A and the
Delaware Act.

Def.’s Counterclaim p.13.

Now, Wilo moves the Court to strike RST’s counterclaim,
arguing that Defendant has failed to establish that Wilo’s
purported damages are connected to conduct that is actionable
under either Chapter 93A, or the Delaware Act.
Discussion
First, the Court must address the lack of clarity regarding
which Federal Rule Plaintiff filed its motion to strike under.
Because Plaintiff’s initial motion did not specify, much like
Defendant’s best guess, the Court presumed that the motion was
filed pursuant to Section 12(f) of the Federal Rules of Civil
Procedure.

Rule 12(f) permits a court to “strike from a

pleading an insufficient defense or any redundant, immaterial,
impertinent, or scandalous matter.”

However, Plaintiff

clarifies within a footnote in its Reply that its motion to
strike was brought pursuant to Rule 12(b)(6).

Pl.’s Reply. p.1

n.1.
The most prevalent challenge to a counterclaim is under
Rule 12(b)(6) for failure to state a claim upon which relief can
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be granted.

A Rule 12(b)(6) motion to dismiss does not test the

merits of the claim, instead, it tests only the sufficiency of
the complaint, or, in this case, the Counterclaim.

Triad

Associates, Inc. v. Chicago Housing Authority, 892 F.2d 583, 586
(7th Cir, 1989), cert, denied, 498 U.S. 845 (1990).

A complaint

or counterclaim "need only provide a 'short, and plain statement
of the claim showing that the pleader is entitled to relief,’
sufficient to provide the defendant with 'fair notice' of the
claim and its basis.

Tamayo v. Blagojevich, 526 F.3d 1074,

1081, (7th Cir. 2008) (citations omitted).
A court must construe the complaint or counterclaim in the
light most favorable to the claimant, accepting as true all
well-pleaded facts alleged, and drawing all possible inferences
in the claimant's favor.
notice pleadings.

Furthermore, the Rules mandate only

Fed. R. Civ. P. 8(a)(2).

While a court is

not obliged to accept as true mere conclusory allegations
without any supporting facts, see Tamari v. Bache & Co., 565
F.2d 1194, 1199 (7th Cir. 1977), a motion to dismiss will be
granted only "if it is clear that no relief could be granted
under any set of facts that could be proved consistent with the
allegations" Ledford v. Sullivan, 105 F.3d 354,356 (7th Cir.
1997).
Herein, RST alleged specific facts, which, together with
the reasonable inferences that can be drawn from them, may be
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sufficient to state causes of action under either law cited.
Again, the Court need only find that RST provided Wilo with fair
notice of its claim and its basis, and need only dismiss the
counterclaim if it is clear that no relief could be granted
under any set of facts that could be proved consistent with the
allegations.

The Court will address each law in turn.

I. Delaware Act
In order to have standing to bring a cause of action under
the Delaware Deceptive Trade Practices Act, the pleading party
must seek, and must be entitled to receive, injunctive relief.
“[O]ne may collect damages under the DTPA only in conjunction
with injunctive relief.” Grand Ventures, Inc., v. Whaley, 622
A.2d 655, 659 (Del. Super. 1992).

Courts have dismissed claims

under the Delaware Act where the pleading party either (i) was
not seeking injunctive relief,” Lipson v. Anesthesia Services,
P.A., 790 A.2d 1261, 1290 (Del. Super. 2001)(granting the
defendant’s’ motion for summary judgment with regards to the
plaintiff’s claim under the Delaware Act where the plaintiff had
declined to seek injunctive relief), or (ii) where seeking
injunctive relief would be futile, State ex rel. Brady v.
Pettinaro Enterprises, 870 A.2d 513, 537 (Del. Ch.
2005)(dismissing the Attorney General’s claims under the
Delaware Act where his claims for injunctive relief were “not
viable”).
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Herein, RST does not seek injunctive relief, as there is no
behavior on Wilo’s part to enjoin at this point.

Indeed, RST’s

counterclaim sets forth that all of its damages were incurred no
later than 2011, and RST now only seeks money damages to
compensate it for its purported losses.

(Doc. No. 10, ¶38.)

RST directs the Court’s attention to other clauses of the
Delaware Act, arguing that “Section 2531 (b) expressly provides
for "reasonable attorneys' fees,” and Section 2531 (c) provides
for treble damages in certain circumstances, so it cannot be
said that injunction is the sole relief available under Delaware
§2531.”

Def.’s Counterclaim p5, ¶20.

However, the Court is

unconvinced that the necessity for injunctive relief is not
paramount to relief under the Delaware Act.

Accordingly, since

no relief could be granted under any set of facts that could be
proved consistent with the allegations and the Delaware Act
terms, the court must grant Wilo’s motion to strike RST’s
Counterclaim based on relief sought under the Delaware Act.
II. Chapter 93A
Wilo argues that RST’s Chapter 93A argument fails as a
matter of law because it does not include certain necessary
facts.

Wilo supports its argument with case law that RST argues

the Court should not give much weight, if any, since many of the
rulings were not issued in response to a motion to dismiss.
Court finds that the stage the case is in does not make the
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The

holdings any less applicable, and that each case can be relied
upon at the motion to dismiss stage, as well.
RST alleges that it invested money and resources in
advertising and marketing Wilo’s products based on Wilo’s
assurances that it could “’cover his back’” and that “’we’re in
this together,’” and that, as a result of Wilo terminating the
Agreement, RST was not able to recover its investment. (Doc. No.
10, ¶¶33-38.)

Defendant’s allegations amount to seeking damages

under a theory of equitable recoupment.
In order to qualify for equitable recoupment, RST must be
able to prove (i) that it suffered a net loss and (ii) that it
had an exclusive distributorship with Wilo.

Healthco Intern. v.

A-dec, Inc., 1989 WL 104064 (D. Mass. 1989); Zapatha v. Dairy
Mart, Inc., 381 Mass. 284, 408 N.E.2d 1370 (Mass. 1980).

RST’s

own allegations, however, establish that it cannot prove its
entitlement for equitable recoupment under Chapter 93A, as RST
stated how it increased sales by more than 200%; how the
Agreement made clear that RST was not a distributor for Wilo;
the relationship was non-exclusive and limited; and RST was
authorized to represent other manufacturer’s products. (Doc. No.
10, Ex. A, §§1A,9.)
Federal courts have made clear that, even at the pleadings
stage, the pleading party must present sufficient allegations to
make clear that the alleged conduct falls within the “penumbra”
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of actionable conduct under Chapter 93A.

Claims under this

statue are dismissed pursuant to Rule 12(b)(6) where the
allegations fail to specify conduct that rises “to the level of
rascality required.”
297 (D. Mass., 2008).

Declude, Inc. v. Perry, 593 F.Supp.2d 290,
Specifically, the pleading party must

allege something that rises above the bar of general allegations
of breach of contract or negligence.

The Court finds RST’s

claim unable to rise above that bar.

Accordingly, the Court

must grant Wilo’s motion to strike RST’s Counterclaim based on
relief sought under Chapter 93A.
RST has failed to state a cause of action under either the
Delaware Act or Chapter 93A, and for that reason, the Court must
strike and dismiss the Counterclaim under the Federal Rules.
Conclusion
For the reasons set forth above, Plaintiff’s motion to
strike [Dkt. #13] is granted.

Dated: December 13, 2013
E N T E R E D:

_____________________________
MAGISTRATE JUDGE ARLANDER KEYS
UNITED STATES DISTRICT COURT
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